Question 1

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Accepted Answer

The money multiplier is the reciprocal o...

Question 2

The Fed's primary tool to change the money supply is

Accepted Answer

A)   changing the interest rate on reserves.
B)   changing the reserve requirement.
C)   conducting open market operations.
D)   redeeming Federal Reserve notes.

Question 3

A decrease in the money supply might indicate that the Fed had

Accepted Answer

A)   purchased bonds in an attempt to increase the federal funds rate.
B)   purchased bonds in an attempt to reduce the federal funds rate.
C)   sold bonds in an attempt to increase the federal funds rate.
D)   sold bonds in an attempt to reduce the federal funds rate.

Question 4

Which tool of monetary policy does the Federal Reserve use most often?

Accepted Answer

A)   term auctions
B)   open-market operations
C)   changes in reserve requirements
D)   changes in the discount rate

Question 5

M1 includes

Accepted Answer

A)   small time deposits.
B)   savings deposits.
C)   other checkable deposits.
D)   money market mutual funds.

Question 6

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Accepted Answer

A)   decreases from 20 to 8.
B)   decreases from 12.5 to 5.
C)   increases from 8 to 20.
D)   increases from 5 to 12.5.

Question 7

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Accepted Answer

A)   it increases by $250,000
B)   it increases by $200,000
C)   it decreases by $200,000
D)   it decreases by $250,000

Question 8

The discount rate is

Accepted Answer

A)   the interest rate the Fed charges banks.
B)   one divided by the difference between one and the reserve ratio.
C)   the interest rate banks receive on reserve deposits with the Fed.
D)   the interest rate that banks charge on overnight loans to other banks.

Question 9

Consider five individuals with different occupations.  Which of the following pairs of individuals has a double coincidence of wants?

Accepted Answer

A)   Mary and Clark
B)   Clark and Nathan
C)   Nathan and Polly
D)   Polly and Paul

Question 10

Table 29-2.
The information in the table pertains to an imaginary economy. 
-Refer to Table 29-2. What is the M2 money supply?

Accepted Answer

A)   $1,300 billion
B)   $580 billion
C)   $880 billion
D)   $1,000 billion

Question 11

Which of the following institutions is a central bank?

Accepted Answer

A)   the Bank of Japan
B)   the Bank of England
C)   the Federal Reserve System
D)   All of the above are correct.

Question 12

Table 29-1.
The information in the table pertains to an imaginary economy. 
-Refer to Table 29-1. What is the value of M2 in billions of dollars?

Accepted Answer

A)   $9,815 billion
B)   $8,315 billion
C)   $7,565 billion
D)   $7,405 billion

Question 13

Savings deposits are included in

Accepted Answer

A)   M1 but not M2.
B)   M2 but not M1.
C)   M1 and M2.
D)   neither M1 nor M2.

Question 14

The discount rate is

Accepted Answer

A)   the rate at which public banks lend to other public banks.
B)   the rate at which the Fed lends to banks.
C)   the percentage difference between the face value of a Treasury bond and what the Fed pays for it.
D)   the percentage of deposits banks hold as excess reserves.

Question 15

Table 29-8 
-Refer to Table 29-8. The required reserve ratio is 12 percent. Which of the following is true?

Accepted Answer

A)   This banks reserve ratio is 12 percent. Its excess reserves are $0.
B)   This banks reserve ratio is 13.3 percent. Its excess reserves are $120.
C)   This banks reserve ratio is 15 percent. Its excess reserves are $240.
D)   This banks reserve ratio is 10 percent. Its excess reserves are $300.

Question 16

Scenario 29-1.
The monetary policy of Namdian is determined by the Namdian Central Bank. The local currency is the dia. Namdian banks collectively hold 100 million dias of required reserves, 25 million dias of excess reserves, 250 million dias of Namdian Treasury Bonds, and their customers hold 1,000 million dias of deposits. Namdians prefer to use only demand deposits and so the money supply consists of demand deposits.
-Refer to Scenario 29-1. Assuming the only other item Namdian banks have on their balance sheets is loans, what is the value of existing loans made by Namdian banks?

Accepted Answer

A)   625 million dias
B)   875 million dias
C)   1,125 million dias
D)   None of the above is correct.

Question 17

The money supply decreases if the Fed

Accepted Answer

A)   sells Treasury bonds. The larger the reserve requirement, the larger the decrease will be.
B)   sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.
C)   buys Treasury bonds. The larger the reserve requirement, the larger the decrease will be.
D)   buys Treasury bonds. The smaller the reserve requirement, the larger the decrease will be.

Question 18

Most financial assets other than money function as

Accepted Answer

A)   a medium of exchange, a unit of account, and a store of value.
B)   a medium of exchange and a store of value, but not a unit of account.
C)   a store of value and a unit of account, but not a medium of exchange.
D)   a store of value, but not a unit of account nor a medium of exchange

Question 19

If the reserve ratio is 12 percent, then the money multiplier is
A)  8.3.

Accepted Answer

A)   9.3.
B)   7.3.
C)   12.

Question 20

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

Accepted Answer

A)   M1 would increase.
B)   M1 would decrease.
C)   M1 would not change.
D)   M1 might rise or fall.

Exam 29: The Monetary System

Table 29-8 -Refer to Table 29-8. The required reserve ratio is 12 percent. Which of the following is true?

Correct Answer
verified

Consider five individuals with different occupations. Which of the following pairs of individuals has a double coincidence of wants?

Correct Answer
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M1 includes

Correct Answer
verified

Savings deposits are included in

Correct Answer
verified

The discount rate is

Correct Answer
verified

Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M2 money supply?

Correct Answer
verified

The money supply decreases if the Fed

Correct Answer
verified

The discount rate is

Correct Answer
verified

Most financial assets other than money function as

Correct Answer
verified

The Fed's primary tool to change the money supply is

Correct Answer
verified

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Correct Answer
verified
The money multiplier is the reciprocal o...
View Answer

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Correct Answer
verified

Which tool of monetary policy does the Federal Reserve use most often?

Correct Answer
verified

Correct Answer
verified

If the reserve ratio is 12 percent, then the money multiplier is A) 8.3.

Correct Answer
verified

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M2 in billions of dollars?

Correct Answer
verified

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Correct Answer
verified

A decrease in the money supply might indicate that the Fed had

Correct Answer
verified

Which of the following institutions is a central bank?

Correct Answer
verified

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

Correct Answer
verified

Exam 29: The Monetary System

Table 29-8 -Refer to Table 29-8. The required reserve ratio is 12 percent. Which of the following is true?

Correct AnswerverifiedShow Answer

Consider five individuals with different occupations. Which of the following pairs of individuals has a double coincidence of wants?

Correct AnswerverifiedShow Answer

M1 includes

Correct AnswerverifiedShow Answer

Savings deposits are included in

Correct AnswerverifiedShow Answer

The discount rate is

Correct AnswerverifiedShow Answer

Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M2 money supply?

Correct AnswerverifiedShow Answer

The money supply decreases if the Fed

Correct AnswerverifiedShow Answer

The discount rate is

Correct AnswerverifiedShow Answer

Most financial assets other than money function as

Correct AnswerverifiedShow Answer

The Fed's primary tool to change the money supply is

Correct AnswerverifiedShow Answer

Suppose the required reserve ratio is 20%. What is the maximum amount of total money supply that can be created from an initial deposit of $200? In general, why might the actual amount of total money creation be less than the maximum?

Correct AnswerverifiedThe money multiplier is the reciprocal o...View AnswerShow Answer

If the Fed increases the reserve ratio from 5 percent to 12.5 percent, then the money multiplier

Correct AnswerverifiedShow Answer

Which tool of monetary policy does the Federal Reserve use most often?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the reserve ratio is 12 percent, then the money multiplier is A) 8.3.

Correct AnswerverifiedShow Answer

Table 29-1. The information in the table pertains to an imaginary economy. -Refer to Table 29-1. What is the value of M2 in billions of dollars?

Correct AnswerverifiedShow Answer

The reserve requirement is 4 percent, banks hold no excess reserves and people hold no currency. If the Fed sells $10,000 worth of bonds, what happens to the money supply?

Correct AnswerverifiedShow Answer

A decrease in the money supply might indicate that the Fed had

Correct AnswerverifiedShow Answer

Which of the following institutions is a central bank?

Correct AnswerverifiedShow Answer

In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then

Correct AnswerverifiedShow Answer

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Correct Answer
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The money multiplier is the reciprocal o...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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